Coast Guard plans to burn oil slick as concerns mount

SteveGelsi

NEW YORK (MarketWatch) -- The U.S. Coast Guard said Wednesday it scheduled a controlled burn in the Gulf of Mexico to minimize environmental risks of an oil slick coming from the site of the sunken oil rig Deepwater Horizon as concern about the accident mounts.

The Coast Guard said the burn is expected to remove "large quantities of oil" following the April 20 explosion that resulted in the sinking of the $600 million rig and the presumed death of 11 missing workers. The well has been leaking an estimated 1,000 barrels of oil a day.

Work boats will collect oil into a fire-resistant boom approximately 500 feet long, the Coast Guard said. The oil will then be towed to a more remote area, where it will be ignited and burned.

The plan calls for small, controlled burns of several thousand gallons of oil lasting approximately one hour each.

"No populated areas are expected to be affected by the controlled burn operations and there are no anticipated impacts to marine mammals and sea turtles," the Coast Guard said.

"It is a no-win situation," said Jackie Savitz, senior scientist at Oceana, an environmental advocacy group. "The only good answer is prevention and we are past that point. I am actually hopeful that this becomes sort of a reset moment when in thinking about how we develop our offshore oil resources."

She noted that burning has never been done in the ocean, although it has been used to tackle spills in rivers "and they are lot different - not as deep, for one thing."

Ty Priest, director of Global Studies at the business school at the University of Houston and a historian of the oil rig business, said the Deepwater Horizon marks the first major leak at an offshore platform in the Gulf of Mexico since 1979.

The Ixot I blowout at a semi-submersible rig drilling a two-mile-deep well in about 150 feet of water off the coast of Mexico lasted nine months and leaked up to 30,000 barrels of oil a day. Attempts to cap the well were initially unsuccessful. After two relief wells were drilled to relieve pressure from the well, personnel were able to cap it.

In the case of the Deepwater Horizon, the well head sits under about a mile of water.

"I'm sure nothing like this has been tried in 5,000 feet of water," Priest said. "I can't imagine they would have much success."

The accident won't stop offshore drilling in the Gulf of Mexico, but it could hinder efforts by the Obama administration to open up new areas of the U.S. coastline for offshore drilling, he said.

"Politicians like Sen. Bill Nelson, (D., Fla.) were coming around to the idea, but this is causing a big re-think," Priest said. Nelson has called for an investigation of oil rig safety in the wake of the accident.

Priest said offshore rigs are equipped with a blow-out preventer, a series of valves designed to shut down a well in the event of a malfunction.

"It's a reliable technology and we don't have blowouts like this," he said. "There's been a failure somewhere."

Coast Guard Rear Adm. Mary Landry told the Associated Press the well could rank as one of the most significant spills in U.S. history.

The Exxon Valdez oil spill totaled 11 million gallons, versus 42,000 gallons a day leaking from the Deepwater Horizon. It would take about 262 days for the Deepwater Horizon to equal that historic spill.

Analysts at Houston energy research firm Tudor Pickering Holt wrote in a note to clients earlier this week that if the oil slick reaches the shore, "It'll get lots uglier as pictures of oil-coated birds angers public, sells newspapers, raises funds for environmentalists and hurts oil industry perception."

The oil rig now sits about 1,500 away from the wellhead.

Assuming additional attempts to close the leak, BP will attempt to place a dome over the well in the ocean floor to collect the oil before it disperses.

"If fate is smiling, the well will stop flowing on its own...but can't assume that will happen," analysts said.

Drilling a relief well will take months, not weeks, Tudor Pickering said.

Oil well control specialists Boots Coots International Control
WEL, +12.68%
and oil spill response teams will be very busy. Companies such as Tidewater Inc.
TDW, -2.90%
Bristow Group
BRS, -1.83%
and Hornbeck Offshore
HOS, -5.71%
may see more work as a result.

Tudor Pickering estimated that Transocean will lose about 35 cents a share per year in income from the Deepwater Horizon. BP and exploration partner Anadarko Petroleum
APC, -0.10%
will absorb some losses.

"The longer it takes to control the well, the louder the environmental argument will be for less access," Tudor Pickering said. "Issues like this drive up insurance rates, so all operating in Gulf of Mexico may take an insurance hit."

BP said it's supporting and cooperating with U.S. government investigations arising from the sinking of the rig.

"Losing 11 of our industry colleagues is a tragedy for the offshore community," said BP Group Chief Executive Tony Hayward. "As an industry, we must participate fully in these investigations and not rest until the causes of this tragedy are known and measures are taken to see that it never happens again."

The Department of the Interior and Department of Homeland Security announced a joint inquiry into the explosion and sinking of the Transocean Deepwater Horizon on April 22. The U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Oversight and Investigations and Senate Committee on Energy and Natural Resources have also announced investigations.

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